Feature Stories - April 2002

Economic Development in Action

Bringing quality companies to Nevada

by Jennifer Rachel Baumer

The role of the state’s economic development authorities is to diversify Nevada’s economy by encouraging the attraction, retention and expansion of businesses and primary industries in the state. The goal of the Nevada Commission on Economic Development (NCED) when it was formed in 1983 was to go out and recruit companies to Nevada - plain and simple. "Our mission is to work with communities to build the infrastructures businesses need, primarily in rural Nevada," said Bob Shriver, executive director of NCED. "We have developed a system of development authorities throughout the state, some of which were there before the commission was. In essence, these are the client service teams that work in the community. We work at improving the business climate in Nevada, in cooperation with the governor and the lieutenant governor, who chairs the commission. We also work with legislators on laws and regulations to assist business."

Nevada’s Economic Development Climate

Nevada has traditionally weathered economic storms somewhat better than other parts of the country. "If you look at the recent economic downturn that was exacerbated by the tragedy of Sept. 11, Nevada came through it quite well," said Shriver. In November 2001, unemployment hit 6.5 percent in the state, while the U.S. held at 5.7 percent. Considered separately, Northern Nevada remained at 4.2 percent, but the Las Vegas economy took a heavier hit, inspiring the Nevada Development Authority (NDA), which oversees efforts to bring businesses into Southern Nevada, to redouble its efforts to diversify the area’s economy. "Economic diversification in Southern Nevada is more critical than ever before, and is our best resource for long-term stability," said NDA President Somer Hollingsworth.

The NDA recently released a study commissioned to analyze the occupational structure of Southern Nevada (see sidebar). The NDA’s Labor Report was designed to begin the process of building a globally competitive workforce in the Las Vegas area, according to Hollingsworth. The NDA is studying ways of encouraging growth in the five employment sectors identified in the report as having the most potential for growth in Southern Nevada: entertainment, information technology, healthcare services, electronics and administrative/marketing support (call centers).

"The whole idea of diversification is to spread out to a number of different business sectors so that, even if one has a downturn, the others don’t," said Shriver. "That will help to level out the economy. If you go into some of our rural communities and see what happens when a mine closes down, it’s devastating, because everyone depended on that one source of income. We’re trying to minimize that by growing our own companies. In essence, that’s what we’re seeing. People who move here with another company are going out and starting their own businesses, and that’s gratifying as well."

Looking for a Few Good Men, Women... or Businesses

Economic development agencies are looking for firms described as good corporate citizens - those companies who "bring more to the community than they demand from it. Companies that raise the standard of living, the income per capita and per household," said Chuck Alvey, president/CEO of EDAWN (Economic Development Authority of Western Nevada). "People always want to know how many companies are coming in and the square footage [they plan to occupy], but we are more concerned with quality. We put more effort into higher-end companies and try to be honest with those companies with which we don’t intend to do much. We try to create a higher standard and showcase those companies that meet that standard."

At EDAWN’s first annual Chairmen’s Award luncheon in March, the organization recognized three companies that could serve as examples of the type of good corporate citizens it is seeking. Small Business of the Year (under 100 employees) was Cisco Systems, a worldwide leader in networking for the Internet, which has had operations in Reno since 1999. International Game Technology (IGT), the world’s leading manufacturer of gaming machines, received a special award for its longtime service to the community.

Intuit received the Large Business of the Year award. Intuit, Inc. is "a high quality, high-tech, good-pay company that’s done a lot of things in the community," said Alvey. "Their employees built a Habitat for Humanity home and they’ve done many other charitable things. We want these types of companies because when they come here, they make ‘here’ better."

Intuit, the company behind QuickBooks, was looking for a way into the payroll services field when it bought CRI, an existing Nevada business. "CRI had been doing business in Reno [for 20 years]. We looked at the business model and it fit," said Larry King Jr., vice president and general manager of Intuit Payroll Services. "We got a good feeling that if we purchased CRI, we could grow and get the support we needed in the community to make this work."

Intuit connected with EDAWN and TechAlliance@NewNevada almost immediately. "In meeting the demand [for employees], one thing that most encouraged me was the help we got from TechAlliance and the help we got from EDAWN," said King. "That got us connected into the city and our name got known in the area. We did an open house about six months after the acquisition and had 700 people show up to apply for 100 jobs." Intuit started with 225 employees and it now employs 565.

Wanting to establish a presence in the Northern Nevada community, Intuit met with EDAWN and talked about hiring plans, building plans and the company’s values. "We wanted to support, to give back, not just to come in and operate and hope everyone would leave us alone," said King. "So we worked with Habitat and built a home and worked with Junior Achievement. All that came from EDAWN and getting connected."

At that point Intuit realized it was onto something special and could grow here. "Once we announced we were going to build a campus here and sink roots, we had no problem in finding local talent," said King. "Of course, we’ve brought people in from the outside too, but the majority of our new hires were from Reno." When they do need to hire from outside the area, Reno is an easy sell, said King. "Once we get people from the airport to the new facility and they see the city, it’s the easiest sell in the world. We haven’t lost one candidate due to the area. About a year ago, we made the decision to shut down one of our businesses on the East Coast and we offered those employees relocation to Tucson or Mountain View, Calif. or Reno. Of the ones who visited the sites, six out of seven chose to relocate in Reno over the other areas."

In the case of Intuit and many other companies settling in Nevada, major corporations looking to expand a division choose the Nevada contingency. "They keep coming back and keep adding on and on, and that is probably as gratifying to our efforts as anything," said Shriver. "If providing these companies some incentives encourages that investment in Nevada, we think it pays for itself tenfold, in the amount of high-wage jobs we create and in economic impact."

Towards that end, the state allows NCED to provide abatement of all but 2 percent constitutional sales tax on equipment for businesses that meet criteria as a primary industry (i.e., not retail, gaming or mining). When Arrow Electronics, an international company based in New York, was considering construction of a huge distribution facility near Reno, the NCED was eager to provide assistance. "In the case of Arrow Electronics," said Shriver, "the company purchased around $13 million in new equipment and added 66 new jobs that paid $15.00 an hour average wages, at a time when the statewide average wage was $14.12. Intuit came in with $6.6 million in equipment and added 230 jobs with an average wage of $16.50. The sales tax abatement allows qualified businesses to defer costs associated with expanding and creating high-wage jobs in Nevada. Since there’s no personal income tax, the way to value an employee’s impact on the economy is by the amount of money he or she can then use to buy goods and services in Nevada, from homes to cars to groceries."

Said Shriver, "In the recent past a lot of companies have moved here and found that Nevada offers a good business climate and that quality of life for employees is better then they expected. They are also seeing higher productivity. That’s why, when it comes time for major corporations to expand their facilities, they look at Nevada operations and say, ‘Look at what we’re doing in Nevada. Let’s look at expanding that operation.’"

The NDA Labor Report

The Nevada Development Authority (NDA) cited a skilled workforce as the most important factor to a company considering relocation to Southern Nevada. In its recently-released Labor Report, the NDA found the following strengths and weaknesses in the area’s workforce:

High computer literacy rates

Perceived low wage rates

24/7 work structure

Lifestyle

Flexibility of workforce

Labor Mobility

Lack of science and engineering workforce

Lack of IT skills beyond IT-enabled workers

Dominance of hospitality industry in recruitment

Lifestyle

Public education

Labor mobility

Lack of integration between schools and workforce

Lack of information about workforce

The study made the following key recommendations:

• Develop Business Training Networks within each target industry.

• Implement a comprehensive workforce strategy for the Southern Nevada region.

• Implement a regional demographic database that continually updates labor characteristics.

• Realign the Clark County school system (K-12) with the region’s workforce development activities.

• Redefine the role of public higher education in workforce development, focusing on better alignment of Clark County School District and UNLV programs with identified occupations.

• Increase local public-private partnerships and aggressively implement channels that create more access to federal funds and foundations.